Competitive Strategy: Tools for Analyzing Business Environment

This essay discusses the importance of strategy development tools for analyzing the business environment and gaining competitive advantage. It covers Porter's five forces, SWOT analysis, PESTLE analysis, and Resource Based View (RBV) with practical examples of LIDL, Amazon, Apple, and Coca-Cola.

Running head: Competitive strategy
Competitive Strategy

Competitive strategy
Table of Contents
Introduction................................................................................................................................1
Porter five force model...............................................................................................................1
Practical example of LIDL.....................................................................................................2
SWOT Analysis.........................................................................................................................2
Example of Amazon...............................................................................................................3
PESTLE analysis........................................................................................................................3
Example of Apple...................................................................................................................3
Resource Based View (RBV).....................................................................................................4
Example of Coca-Cola...........................................................................................................4
Conclusion..................................................................................................................................4
References..................................................................................................................................5
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Competitive strategy
Introduction
In order to ensure the effectiveness of the business processes, it has become must for the
organizations to take help of the strategy development tools. There are various tools which
ensures the same and helps in identifying and analyzing the business environment. In this
essay, the discussion will be based on 4 important strategic tools and how businesses can gain
competitive advantage by devising effective strategies. The internal and the external
environment analysis will be done using SWOT and PESTLE tool respectively. Porter’s five
forces will be discussing the comprehensive analysis of the business environment and the
effective utilization of the available resource will be discussed using a tool called Resource
based view.
Porter five force model
This is one of the tools which come under the category of external factor. This tool analyzes
the overall external environment and also focus is given in-depth analysis of the factors
which are prevailing in the market. In this tool there are various factor which are considered
for in-depth analysis of the market. The factors related to bargaining power of customers,
suppliers, threat of new entrants, threat of substitution and rivalries. So, these are considered
as the important factors on which the company should emphasize so that growth can be
attained in the market (Garrette, Phelps and Sibony, 2018).
(Source: Research Methodology, 2018).
Practical example of LIDL
a) Bargaining power of the suppliers
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Competitive strategy
It can be stated that it is low as the company do not focus on managing the entire operations
by considering the suppliers. The reason behind this also concerned with good image of the
company and also the share of the market is large of the retailers in Australia and New
Zealand.
b) Bargaining power of customers
The customers have various choices to choose from the wide range of the products. Where
there is low cost of the product the customer purchases the similar product from that retailer.
So, it can be stated that the bargaining power is high of the customers.
c) Threat of new entries
It is low as the capital requirement is more to establish a business in the competitive market.
So, companies focus on maintaining the capital so that outlet can be opened in the market.
d) Threat of substitution
It is also high as there are many retailers offering similar products to the company so the
customers substitute the products easily. The customers focus on their convenience factor
before purchasing the product by the customers.
e) Rivalries
It can be stated that it is high as there are many other companies operating the similar
activities in the market. Competition level is the challenge faced by the companies. The
companies like Tesco, Wal mart and Coles are considered as the competitor which affect the
growth.
SWOT Analysis
A widely used tool, called SWOT analysis is a strategic tool used to analyze the business
environment based on 4 factors. The factor comprises of Strength, weakness, opportunities
and threats. The internal environment is analyzed using strength and weakness which
includes factors like leadership skills, motivation technique used for employees, policies laid
down by the organization. The external analysis is done by analyzing the opportunities
available and the possible threats. The technological tools used by rival companies, policies
of government etc. are the external factors. By effective Strategizing techniques,
organizations can integrate its business with efficient techniques and gain competitive
advantage (Dominici, 2017).
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Competitive strategy
Example of Amazon
Amazon is a multinational organization and a leading e-commerce company which is popular
among people. The strength of amazon is its presence and the name it has created in the
market. It is a notable brand and is spread across every corners of the world. But being a huge
organization also has its weaknesses. Amazon notable weakness is its supply chain division
which sometimes creates issues in effective delivery of the product resulting in dissatisfaction
of customers. Amazon has a huge opportunity to increase its market value in Asian countries
and develop potential customer base but along with the opportunity, the threat it might face is
against the local e-commerce companies. For example, china has Alibaba which itself is a big
organization.
PESTLE analysis
An effective tool which is used in analyzing the external environment is called PESTLE
framework. It analyses the external environment on the grounds of six factors which are
political, economic, social, technological, environmental and legal (Yüksel, 2012). Political
factors deal with the governmental factors, economic factor comprises the country’s
economic condition, and social factors are the areas that include age distribution, population
growth. Technological factors suggest the new ways and innovative factors in a business,
environmental factors are the factors which might affect the surroundings directly or
indirectly and legal factors includes the legal and ethical standards defined (Shabanova et al.,
2015).
Example of Apple
Apple Inc. deals in wide range of electronic products like laptops, smartphones, applications
etc. It is one of the most reputed brands running successfully in the business environment.
As the company has its presence across the globe due to which it faces some political tension
in some Asian countries like china as the main source of low labor cost is this country. The
economy of USA from where the organization operates favors the company’s business
operations. The innovation that is integrated with each product makes the brand a sign of
social status and is favorite among the people (Sodhi, 2015). Apple is known as an
organization which is far advanced when it comes to technological integration in its products
which makes it unique. The organization has been in news due to several legal issues due to
copyright infringements with rival companies like Nokia, Samsung which still act as a threat.
The company has used a comprehensive approach to minimize the environmental issue which
includes reducing the carbon footprints and recycling the electronic waste.
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Competitive strategy
Resource Based View (RBV)
Using the RBV model, it signifies the use of the available resources in order to gain
competitive advantage. It defines that the prime focus of the organization should be on the
effective utilization of internal sources then after that the focus should be on the business
environment. This is studied using the VRIO model which analyses the resources and collects
the necessary data. VRIO is termed as valuable, rare, inimitable and organized. The resources
that comes under the VRIO model are the resources that can help the organizations to
overcome the competitive environment (Hitt, Xu and Carnes, 2016).
Rare resources are those which are limited to a specific organization. If a resource is able to
provide valuable service to its customers then it comes under valuable resource. Resources
should not be imitable so that the threat from substitute product is minimized. The most
important point for a resource is that it should be organized in a way to provide efficient
productivity (Tan and Sousa, 2015).
Example of Coca-Cola
Coca-Cola is leading beverage company with its availability across all the countries. The
organization has utilized its available resource of its brand image and acquired several other
brands like Thumbs Up, Minute maid which has made it valuable. Due to uniqueness of its
product, it is very rare in the market. The range of products are quite inimitable due to a
smaller number of competitors available. The resources like the marketing skills, supply
chain is very well organized which makes them a leading company in the global market.
Conclusion
So, by emphasizing on these major tools it can be stated that to achieve growth and to
maintain the competitive advantage it is important for the companies to have in depth
analysis. These tools can help in maintaining the overall production of the company and can
also help in taking right decision in the workplace. The company should focus on these tools
and then conduct the strategic planning by considering the overall activities. It will boost
market share and goodwill in the market.
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Competitive strategy
References
Dominici, G., 2017. Systems Thinking Research in the Twenty-First Century: A SWOT
Analysis. International Journal of Systems and Society (IJSS), 4(1), pp.10-18.
Garrette, B., Phelps, C. and Sibony, O., 2018. Structure the Problem: Analytical Frameworks.
In Cracked it! (pp. 95-116). Palgrave Macmillan, Cham.
Hitt, M.A., Xu, K. and Carnes, C.M., 2016. Resource based theory in operations management
research. Journal of Operations Management, 41, pp.77-94.
Research Methodology., 2018. Five force analysis. [Online]. Available at: https://research-
methodology.net/apple-porters-five-forces-analysis-3/. [Accessed on15 December, 2018].
Shabanova, L.B., Ismagilova, G.N., Salimov, L.N. and Akhmadeev, M.G., 2015. PEST-
Analysis and SWOT-Analysis as the most important tools to strengthen the competitive
advantages of commercial enterprises. Mediterranean Journal of Social Sciences, 6(3), p.705.
Sodhi, M.S., 2015. Conceptualizing social responsibility in operations via stakeholder
resource‐based view. Production and Operations Management, 24(9), pp.1375-1389.
Tan, Q. and Sousa, C.M., 2015. Leveraging marketing capabilities into competitive
advantage and export performance. International Marketing Review, 32(1), pp.78-102.
Yüksel, İ., 2012. Developing a multi-criteria decision making model for PESTEL
analysis. International Journal of Business and Management, 7(24), p.52.
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